Report Highlights:

Driven by growing demand for animal products, China's soybean imports are estimated to hit a record 74 million tons in MY14/15, and continue to surge to a forecast 77.5 million tons in MY15/16 (unchanged from previous report). Post's July forecast for MY15/16 total domestic oilseed production is 3.26 million tons lower than the estimated 57 million tons in MY14/15. Lower domestic production together with growing demand for protein meal and vegetable oil continue to encourage strong imports of oilseeds in MY15/16. Vegetable oil imports stabilize in response to the increase in oilseed imports.

Executive Summary:

Driven by growing demand for animal products, China's soybean imports are estimated to hit a record 74 million tons in MY14/15, and continue to surge to a forecast 77.5 million tons in MY15/16 (unchanged from previous report). Post's July forecast for MY15/16 total domestic oilseed production is 3.26 million tons lower than the estimated 57 million tons in MY14/15. Lower domestic production together with growing demand for protein meal and vegetable oil continue to encourage strong imports of oilseeds in MY15/16. Vegetable oil imports stabilize in response to the increase in oilseed imports.

Domestic oilseed production unlikely to increase

Soybeans: Post forecast for MY15/16 soybean production of 11 million tons remains unchanged. Domestic soybean production continues to fall as a result of lower per unit profits compared with grain crops. In a meeting held at the end of June, China's Minister of Agriculture stated that in 2016 it will be necessary to moderately reduce the corn area in the four northeast provinces. Specifically he highlighted the need to substitute corn with drought resistance crops such as pulses and coarse cereals in high latitude and dry regions. Other plans include adding ensilage corn to combine animal production with crops production; planting fruit trees and forage in regions impacted by erosion; and improving crop rotation by encouraging corn+ soybean rotation pattern. However, no specific support policy/or measures were announced to adjust corn area in the northeast provinces in 2016. The lack of details in how this crop adjustment proposal would be executed indicates it will have a limited impact in boosting soybean area in 2016. Other factors depressing soybean production is the implementation of the target-price based subsidy that went into effect in MY14/15. Industry sources reported that in MY14/15, the average selling price ranged only from RMB 4,500 to 4,600/ton ($726 to $740/ton). The MY14/15 average selling price, including an average subsidy of RMB500/ton ($80/ton) was lower than the "floor price" given under the MY13/14 support policies of RMB4,800/ton ($774/ton).

Rapeseed: China's National Statistics Bureau (NSB) estimated MY15/16 domestic summer harvested rapeseed production at 13.88 million tons, up 1.2 percent over the previous year. Total production is thus likely to reach 14.9 million tons if the autumn harvested production is included. However, the marketing of the MY15/16 crop appeared to be very slow as traders/farmers determined when to do business. China's National Grain and Oils Information Center (CNGOIC) data showed that as of July 10, total purchased volume by major enterprises in the 9 rapeseed-producing provinces were merely 620,000 tons. This volume is significantly lower than the 1.56 million tons in the previous year. Industry sources indicated that in MY15/16, the subsidies to rapeseed farmers in Anhui and Hubei averaged RMB705/Ha ($114/Ha). Based on yields of 2,250Kg/Ha (converted subsidy rate at RMB320/ton) and the current market price of RMB3,400/ton, rapeseed farmer's gross income per ton is RMB3,720/ton ($600/ton), significantly down from the floor price of RMB5,100/ton ($823/ton) enforced during the previous year.

Despite NSB's high production estimate, most industry sources believe the MY15/16 production remains as low as in the previous years. Given the reduced income for farmers and current market trends, many expect China's rapeseed area to decline further in 2016.

Cottonseed: Post forecast for MY15/16 cottonseed production of 9.54 million tons, remains unchanged from its previous report. This is 2.2 million tons lower from than the previous year mainly as a result of government's policy change. Peanuts: Post forecast for MY15/16 peanut production of 16.7 million tons, also remains unchanged from its previous report. This forecast is up slightly from the estimated 16.5 million ton in MY14/15.

MY14/15 soybean imports likely to hit record 74 million tons

MY14/15 soybean imports continue to be strong despite a slight fall in feed production during the first months of 2015. Soybeans imports hit a record 8.09 million tons increasing total soybean imports in the first 9 months of MY14/15 to 53.8 million tons, up 2 million tons from the previous year. Imports in the last quarter are likely to exceed 20 million tons signaling that total imports for MY14/15 could reach 74 million tons.

Feed production in the first half of 2015 declined 1.7 percent over the same period of 2014 mainly due to reduced inventory of swine as a result of negative profits for swine farming since 2013. Poultry feed production also experienced a slight fall in the first half of 2015. Other feed production appears to increase but specific data and growth rate are not yet available. As reported by NSB, total meat production dropped by 2.4 percent over the previous year to 39.06 million tons, of which pork production slipped by 4.9 percent to 25.74 million tons.

However, since the end of March 2015, hog prices have been on a growing trend. MOA data indicated the "hog to corn price ratio" exceeded the breakeven point since June 2015. ChinaJCI Consulting data indicated this ratio reached 7.29:1 during the 30th week (July 18-24), and the average profit surged to RMB400 to RMB800/head. Increasing hog prices are expected to boost swine inventory demanding more feed in the second half of 2015. Protein meal demand continues to be driven by growing animal producing capacity, scale animal farming and use of industry feed. Increasing use of soybeans (extruded) as feed ingredient, and for food processing are both driving soybean imports. Current low soybean meal prices coupled with an anticipated delay in the domestic rapeseed meal supply both support a recovery in the use of soybean meal in the second half of 2015. It is worth noting that China continues to produce concentrate supplementary feed and feed pre-mixed with feed additives which need to add protein meals before consumption.

Long term soybean imports remains bright

China's economic growth is expected to slow in 2015. Based on NSB, GDP growth was 7 percent in the first half of 2015, compared to the 7.4 percent growth rate in 2014. However, the net GDP growth value per year remains vast even based on a lower GDP growth rate. A sustainable mid-level GDP growth rate with a focus on deepening reform and boosting innovation will be the priorities for the government in the coming years.

China's industry leaders expect demand for livestock products to continue growing in the coming years but at a lower rate than in previous years. Specifically, in the next 10 years the consumption growth rate is forecast at 3.3 percent per year for pork, 1.3 percent for poultry meat, 0.7 percent for eggs, 2 percent for beef and 2.4 percent for mutton. This constant growth in livestock products will fuel a stable demand of protein ingredients which will rely on imports of soybeans.

Imports of animal products

Although China's animal production sector faces many challenges such as environmental pressure and shortage of feed ingredients, China's industry leaders insist that domestic animal production is critical for the welfare of the Chinese consumers. Leaders further indicate that excess imports can seriously impact domestic production. Imports of animal products, they recommend, should be managed and take place when some domestic products are in short supply.

Vegetable oil imports expected to fall

Global vegetable oil prices increasingly fluctuate along with crude oil prices. Low crude oil prices reducing none mandatory use of biodiesel in many countries has resulted in an excessive supply of vegetable oil and bearish prices in recent years. In addition, increased planted area for oilseed crops, particularly palm trees, is expected to further add to the vegetable oil supply in the coming years.

China's vegetable oil demand is increasingly met by the large domestic crushing sector favoring imports of oilseeds. Imports of vegetable oils, especially soy oil and rapeseed oil, are expected to shrink or remain stable to make up shortages in the domestic market. Favorable lower prices for soy oil and rapeseed oil have taken some market share away from palm oil. Industry sources reported less palm oil use in blended cooking oil since 2014.

China's total vegetable oil consumption remains growing, with net growth estimated at about 600,000 tons per year. However, MY14/15 imports of major vegetable oils are estimated to fall with soybean oil imports plummeting to 500,000 tons from the 1.35 million tons, rapeseed oil imports down to 600,000 tons from the 902,000 tons in MY13/14. Palm oil imports are expected to fall to 5.3 million tons in MY14/15 from the 5.57 million tons in MY13/14. Nonetheless, total vegetable oil imports are forecast to recover to 7.88 million tons in MY15/16 from the estimated 7.12 million tons in MY14/15. This will still be a lower volume of imports compared to the 8.57 million tons in MY13/14

PSD Table

Country

China, Peoples Republic of

Commodity

Total Oilseeds (1000 tons; 1000Ha)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

7/2015

Area Planted

25,604

24,737

25,370

23,845

23,070

22,475

Area Harvested

24,737

24,737

24,320

23,845

23,070

22,475

Beginning Stocks

13,166

13,166

15,562

15,562

15,273

15,093

Production

58,888

58,888

57,557

57,007

55,380

53,740

MY Imports

75,602

75,570

77,725

77,300

81,250

82,250

MY Imp. from U.S.

27,041

27,049

30,000

28,000

28,500

29,000

MY Imp. from the EC

0

0

0

0

0

0

TOTAL SUPPLY

147,656

147,624

150,844

149,869

141,273

151,083

MY Exports

953

911

850

890

11,570

840

MY Exp. to the EC

226

230

230

230

228

228

Crush Dom. Cons.

107,633

107,634

111,679

110,416

104,580

112,990

Food Use Dom. Cons.

17,135

17,210

17,520

17,770

26,820

17,880

Feed,Seed,Waste Dom.Cons.

6,373

6,307

5,522

5,700

3,310

5,310

TOTAL Dom. Consumption

131,141

131,151

134,721

133,886

127,540

136,180

Ending Stocks

15,562

15,562

15,273

15,093

25,153

14,063

TOTAL DISTRIBUTION

147,656

147,624

150,844

149,869

141,273

151,083

Calendar Year Imports

76,666

76,648

79,425

77,180

94,230

81,625

Calendar Year Imp. U.S.

29,505

30,044

28,005

27,501

29,050

29,501

Calendar Year Exports

931

1,025

955

1,070

940

1,040

Calendar Year Exp. to U.S.

74

91

73

60

70

60

PSD Table

Country

China, Peoples Republic of

Commodity

Total Meal (1000 tons)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

7/2015

Crush

108,833

108,834

112,879

111,966

114,680

114,190

Beginning Stocks

0

0

0

0

0

0

Production

75,200

75,030

78,725

77,840

80,533

80,226

MY Imports

1,433

1,428

1,080

1,212

1,205

1,202

MY Imp. from U.S.

99

88

70

90

90

95

MY Imp. from the EC

5

0

5

0

5

0

TOTAL SUPPLY

76,633

76,458

79,805

79,052

81,738

81,428

MY Exports

2,091

2,065

2,071

2,083

1,651

2,263

MY Exp. to the EC

100

100

50

45

50

45

Industrial Dom. Cons.

1,614

1,636

1,632

1,652

1,652

1,702

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom. Cons.

72,928

72,758

76,102

75,318

78,435

77,462

TOTAL Dom. Consumption

74,542

74,394

77,734

76,970

80,087

79,164

Ending Stocks

0

0

0

0

0

0

TOTAL DISTRIBUTION

76,633

76,459

79,805

79,053

81,738

81,427

Calendar Year Imports

1,362

1,359

1,110

1,215

1,210

1,207

Calendar Year Imp. U.S.

100

99

70

90

90

95

Calendar Year Exports

2,115

2,143

1,761

1,978

1,871

2,188

Calendar Year Exp. to U.S.

20

36

20

38

20

38

PSD Table

Country

China, Peoples Republic of

Commodity

Total Oils (1000 tons)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

7/2015

Crush

107,633

107,634

111,679

111,816

113,480

113,090

Beginning Stocks

3,617

3,062

3,826

3,497

3,083

2,401

Production

23,607

23,587

24,281

24,261

24,525

24,555

MY Imports

8,573

8,573

7,800

7,120

2,845

7,881

MY Imp. from U.S.

186

186

150

150

5,875

120

MY Imp. from the EC

0

0

0

0

0

0

TOTAL SUPPLY

35,797

35,777

35,907

35,139

30,453

34,848

MY Exports

116

116

136

82

6,015

85

MY Exp. to the EC

0

0

0

0

0

0

Industrial Dom. Cons.

2,150

2,150

1,900

2,250

0

2,270

Food Use Dom. Cons.

29,705

29,753

30,628

30,395

29,852

30,923

Feed Waste Dom. Cons.

0

0

0

0

3,750

0

TOTAL Dom. Consumption

18,198

31,903

18,245

32,645

12,823

33,193

Ending Stocks

16,525

3,758

16,726

2,412

22,475

1,571

TOTAL DISTRIBUTION

22,046

35,777

21,524

35,139

15,504

34,849

Calendar Year Imports

22,608

7,961

23,481

7,870

23,364

8,280

Calendar Year Imp. U.S.

1,135

186

1,000

95

7,700

100

Calendar Year Exports

210

105

167

78

140

88

Calendar Year Exp. to U.S.

100

0

80

0

80

0

PSD Table

Country

China, Peoples Republic of

Commodity

Oilseed, Soybean (1000 tons; 1000 Ha)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

7/2015

Area Planted

7,700

6,850

7,700

6,600

6,400

6,100

Area Harvested

6,850

6,850

6,800

6,600

6,400

6,100

Beginning Stocks

12,378

12,378

14,427

14,427

14,377

14,077

Production

12,200

12,200

12,350

12,000

11,500

11,000

MY Imports

70,364

70,364

73,500

74,000

77,500

77,500

MY Imp. from U.S.

27,041

27,040

30,000

28,000

28,500

29,000

MY Imp. from EU

0

0

0

0

0

0

Total Supply

94,942

94,942

100,277

100,427

103,377

102,577

MY Exports

215

215

200

300

250

280

MY Exp. to EU

10

10

10

10

10

10

Crush

68,850

68,850

73,850

74,000

77,100

77,000

Food Use Dom. Cons.

9,650

9,650

10,000

10,250

10,350

10,350

Feed Waste Dom. Cons.

1,800

1,800

1,850

1,800

1,800

1,800

Total Dom. Cons.

80,300

80,300

85,700

86,050

89,250

89,150

Ending Stocks

14,427

14,427

14,377

14,077

13,877

13,147

Total Distribution

94,942

94,942

100,277

100,427

103,377

102,577

CY Imports

71,399

71,401

75,500

73,000

79,500

77,000

CY Imp. from U.S.

30,028

30,028

28,000

27,500

29,000

29,500

CY Exports

207

300

250

280

250

280

CY Exp. to U.S.

71

80

70

60

70

60

PSD Table

Country

China, Peoples Republic of

Commodity

Oilseed, Rapeseed (1000 tons;1000 Ha)

2013/14

2014/15

2015/16

USDA Official

Post Estimate New

USDA Official

Post Estimate New

USDA Official

Post Estimate New

Market Year Begin

10/2013

10/2014

7/2015

Area Planted

7,531

7,531

7,500

7,500

7,400

7,400

Area Harvested

7,531

7,531

7,500

7,500

7,400

7,400

Beginning Stocks

632

632

1,036

1,036

836

936

Production

14,458

14,458

14,600

14,400

14,200

14,100

MY Imports

5,046

5,046

4,100

4,500

3,600

4,600

MY Imp. from U.S.

0

0

0

0

0

0

MY Imp. from EU

0

0

0

0

0

0

Total Supply

20,136

20,136

19,736

19,936

18,636

19,636

MY Exports

0

0

0

0

0

0

MY Exp. to EU

0

0

0

0

0

0

Crush

18,500

18,500

18,300

18,400

17,500

18,250

Food Use Dom. Cons.

0

0

0

0

0

0

Feed Waste Dom. Cons.

600

600

600

600

550

550

Total Dom. Cons.

19,100

19,100

18,900

19,000

18,050

18,800

Ending Stocks

1,036

1,036

836

936

586

836

Total Distribution

20,136

20,136

19,736

19,936

18,636

19,636

CY Imports

5,081

5,081

3,800

4,000

4,000

4,400

CY Imp. from U.S.

0

0

0

0

0

0

CY Exports

0

0

0

0

0

0

CY Exp. to U.S.

0

0

0

0

0

0